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Question
I closed a sublease deal on April 16 and was scheduled to move into the property. The owner was supposed to provide reasonable consent, but I have not been able to move into the building because the owner is now requiring me to get locked into a two year contract with a $25,000 irrevocable payment to him. My business is suffering because I have no place to conduct business. He is not in a position to owner finance, yet he is attempting to force me into a two year contract. What should I do?
Laura-
I will need some more detailed information to be able to assist you with the problem you have developed.
When you say you "closed" a sublease deal, does that mean that the prime tenant who originally leased the premises and the landlord BOTH signed and approved a legally binding Sublease where your company would occupy the prime tenants space?
The approved sublease terms should have addressed when you could move into the space, how long the sublease term was for,("the owner is now requiring me to get locked into a TWO YEAR contract..."), and the specific details of a "25,000 irrevocable payment" that you must make to the owner.
I don't understand what "the owner is now requiring me to get locked into a two year contract..." means. If you have a binding Sublease agreement already, the owner (landlord) cannot make you sign a new agreement with different terms. If the remaining term of the prime lease was two years, that is the only lease timeframe that you can sublease this space. He cannot sublease you his premises for longer that his lease is for, and although technically the prime lease MAY make it possible to sublease for less than the remaining lease term; you shouldn't do so.
Furthermore, what is it that the owner is "not in a position to finance"? It sounds like perhaps the landlord is thinking about letting the prime tenant out of his remaining lease obligation if he can get you to lease the same premises directly from him right away, but he will only do this if you put up a large amount of money to secure potential rental loss the landlord would incur if your business fails and you stop paying the rent before your new lease term ends. This however, is just a guess on my part because I don't have enough details to piece together what is happening.
If you could send me a follow-up note that clarifies more (as much as possible) of the details of the actions you have described, I will be happy to help you sort this out. The information you sent needs more context regarding the activities you have been involved for me to advise you about what to do about your sublease situation.
Sorry. Please send me the information and I will assist you ASAP.
Don't rush into anything that makes you uncomfortable about its business prudence.
-Jim
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Answers by Expert:
Jim Avancena, CPM
Expertise
Best qualified to answer questions that involve commercial leases, that is, basic issues as well as the often unexpected effects of the complexities and inter-relationships of the provisions a lease may contain, explain how seemingly innocuous text in your lease can have a major impact on a Tenant or Landlord and their business operations, and the common practices utilized in the industry. I can untangle most matters that may come up from the time a tenant begins searching for a office or store space and the lease acquisition process, concerns related to remodeling/improving the leased premises, moving-in, subletting or assigning the leased space, and a long list of problems that may come up during the lease term and even after a tenant moves out. I have practical experience with most property management issues and resolving landlord and tenant disputes - especially those involving what may appear to be overcharges assessed for additional lease charges like CAM costs, operating expense reimbursement, real estate taxes, utilities, construction improvements etc. Note that I am not an attorney and cannot provide legal advice.
Experience
Thirty years active experience in the commercial real estate industry as a licensed real estate broker in the Washington DC Metro area (DC, Northern Virginia & Maryland). I have been admitted (approved) by the Maryland and DC courts to testify as an expert witness on the subjects of Commercial Leasing and Property Management in the area of standard industry practices. I have had a business for the last 14 years advising virtually every form of business entity from large national corporations to the smallest ma & pa new businesses regarding a wide range of commercial real estate matters in addition to property management and commercial leasing.
Organizations
Currently my three children keep me so busy that it is difficult to participate in organizations with continuing and specific time requirements.
Publications
I publish a local commercial real estate newsletter titled: "Tenants First". My firm was the subject of a high profile Washington Post business section cover page (2.25 full pages) feature story on January 13, 1993; titled "Overcharging Overhead".
Education/Credentials
BA in Political Science from Memphis University, and five years of study in the real estate development summer program at MIT. I was certified as a commercial property manager (CPM-IREM), and currently hold a brokers license in Maryland and the District of Columbia.
Awards and Honors
The same plaques and honors that most others in my industry have earned. I have none that I consider especially meaningful.
Past/Present Clients
Past clients include: The World Bank, George Washington University, National Association of Criminal Defense Attorneys, US Department of Commerce, The American Benefits Council, K-Mart Development, many law firms, a national union, other major organizations, and many, many small business firms and retail operators that I am most honored to serve. I estimate more than 1,500 firms/organizations.
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